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Dropbox, Inc.'s (NASDAQ:DBX) Has Found A Path To Profitability

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  • DBX

With the business potentially at an important milestone, we thought we'd take a closer look at Dropbox, Inc.'s (NASDAQ:DBX) future prospects. Dropbox, Inc. provides a collaboration platform worldwide. With the latest financial year loss of US$256m and a trailing-twelve-month loss of US$248m, the US$12b market-cap company alleviated its loss by moving closer towards its target of breakeven. The most pressing concern for investors is Dropbox's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Dropbox

According to the 8 industry analysts covering Dropbox, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$222m in 2021. The company is therefore projected to breakeven around a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 25% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
earnings-per-share-growth

We're not going to go through company-specific developments for Dropbox given that this is a high-level summary, though, keep in mind that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with Dropbox is it currently has negative equity on its balance sheet. This can sometimes arise from accounting methods used to deal with accumulated losses from prior years, which are viewed as liabilities carried forward until it cancels out in the future. Oftentimes, losses exist only on paper but other times, it can be a red flag.

Next Steps:

This article is not intended to be a comprehensive analysis on Dropbox, so if you are interested in understanding the company at a deeper level, take a look at Dropbox's company page on Simply Wall St. We've also put together a list of relevant aspects you should further examine:

  1. Valuation: What is Dropbox worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Dropbox is currently mispriced by the market.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Dropbox’s board and the CEO’s background.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.